Nepal Rastra Bank to Withdraw Rs 40 Billion from Banking System via Deposit Collection Tool

Kathmandu. Nepal Rastra Bank (NRB) is set to withdraw Rs 40 billion from the banking system using a deposit collection tool. Following an accumulation of excess liquidity, the central bank will absorb the funds for a period of 160 days. Currently, liquidity remains abundant in the banking system due to stagnant credit demand. 

Banks and financial institutions are providing funds to the central bank at interest rates hovering around 3 percent. The central bank has been utilizing deposit collection tools and standing deposit facilities to manage excess liquidity and interest rates within the financial system. Only 'A', 'B', and 'C' class banks and financial institutions licensed by the Rastra Bank are eligible to participate in the bidding process. 

In the allocation of long-term deposit collection, the central bank will prioritize bids with the lowest interest rates until the total amount is reached. Bidding is being conducted today via an online system, with interest rates determined through the auction process. The minimum bid amount is Rs 100 million, with subsequent bids allowed in multiples of Rs 50 million up to the total amount requested. 

The principal and interest for this 160-day deposit collection instrument will be repaid on Ashoj 21. 

Under the central bank's open market operations procedures, the Operations Committee is authorized to use long-term deposit collection tools with a maturity of up to six months to manage excess liquidity and stabilize market interest rates. The central bank has been frequently utilizing this mechanism based on these provisions.–News Agency Nepal